Toledo area home building activity rises, but pace remains slow

6/8/2013

BY JON CHAVEZ BLADE BUSINESS WRITER

Chet Pieper of Gibsonburg, in the front loader, and Robert Sengstock of Holland, with the surveying stick, dig the foundation for a house at Twin Creek Lane in Sylvania Township. The new-home construction industry, experts say, is growing slowly.

With a career spanning 43 years in the home-building industry, developer Doug Wamsher has experienced every peak and valley that the industry hit over the last four decades.

In Mr. Wamsher’s view, the economic conditions that caused home building to nose-dive the last five years are pretty much over, and the area is poised to begin another era of new-home construction.

“Once it begins to grow it, it’s going to take off like a train leaving the station,” said Mr. Wamsher, president of Millstream Development Co. of Sylvania, which has developed more than a dozen area subdivisions, mostly in the Sylvania area, over the decades. “Everything’s loaded. It’s just time to get the train moving.”

But exactly when that train will start to move remains unclear.

Despite some positive signs — the opening of new plats in existing subdivisions, demand for available lots, a rise in the number of housing-start numbers, and upbeat attitudes by builders whose workloads have improved since 2009 — the area’s home-building industry is still looking for more proof that new-home demand is getting closer to a pre-2006 scenario when building permits annually surged past the 1,500 mark.

“There’s a lot of commercial activity now, and a lot of those commercial things are based on greater residential activity. But honestly, I don’t think we'll ever see those big numbers again,” cautions Mike Rudey, who is the chief building inspector for Wood County.

“Everybody talks about when we would do 400, 500, or 600 homes a year in 2005 and before. But now we’re only at 50 homes through the end of April,” Mr. Rudey said. “Things are definitely better than what they were in 2009. But beyond that? I don’t see anything happening, or I don’t feel that happening.”

New-home building bottomed out in 2009 when a total of 274 single-family home permits were issued in Toledo, Oregon, the rest of Lucas County, and Wood County, according to statistics from those jurisdictions compiled by the Home Builders Association of Greater Toledo Inc.

Since then the situation has improved, albeit in small increments.

In 2010 there were 319 permits issued, in 2011 there were 276 permits, and in 2012 there were 363 permits.

Through April 30 of this year, 133 permits were issued in those four jurisdictions.

A house in the Country Walk subdivision in Sylvania Township is almost complete. Existing subdivisions are expanding, but new development isn't happening in Lucas County, said Tom Lemon, director of the Toledo-Lucas County Plan Commission.

Nationwide, building permits issued this year through May 16 total just more than 1 million, up 14.3 percent from the same period a year ago, according the NAHB.

Actual single-family housing starts through May 16 total 610,000, down 2.1 percent from the same period a year ago, the national home builders group said.

Locally, new-home starts have “definitely maintained a relatively strong pace this year when you compare us to last year. It’s up 30 percent from last year in terms of building permits,” said Bill Brennan, executive director of the Home Builders Association of Greater Toledo.

Home building has come back to the point where the HBA has committed to hold its annual Parade of Homes at a single subdivision site, Wesley Farms in Whitehouse, next spring.

The association hasn’t held a single-site Parade since 2004, mainly because it was hard to find several builders who all could afford to build homes that aren’t presold at the same location.

“My goal is to have at least eight builders, and I’ve already got five lined up,” Mr. Brennan said.

Area government officials also sense a positive trend.

Phil Klocinski, Lucas County building inspector, said there were 108 new housing starts through the end of May in the 17 cities, villages, townships, and unincorporated areas covered by Lucas County.

Not included are Toledo, Maumee, and Oregon.

“That’s the best data I’ve seen since 2007. In 2007 we had 116 starts through May, so we’re mirroring 2007,” Mr. Klocinski said. “I'm hearing from people I haven’t seen in four years.”

Mr. Klocinski said there is a feeling of optimism among builders and contractors that things will continue to get better.

“I feel positive. I don’t think it’s going great guns like in the late 1990s and early 2000s. But business is picking up,” he added.

Tom Lemon, director of the Toledo-Lucas County Plan Commission, said there’s also an uptick in terms of subdivisions development.

“We’ve had six final plats submitted in the Lucas County townships that we serve. That is a positive sign,” Mr. Lemon said. “At this time last year we only had three.”

All of the submissions, however, are to expand existing subdivisions. New developments aren’t happening, the plan commission director noted.

“It may be a while yet before we see development like we used to see. Everything now is just senior developments going forward,” Mr. Lemon said.

Mr. Wamsher’s Maple Creek subdivision in Sylvania is a good example. Current lots are sized to permit a garage that loads from the front.

The developer is planning another phase for Maple Creek that would provide bigger lots so that garages could be entered from the side, providing a more aesthetically pleasing look.

“I don’t think many people were putting in new plats the last few years, but now we’re getting to a point where it’s time to start adding new inventory to what we’ve already had,” Mr. Wamsher said.

Builder Josh Doyle of Homes by Josh Doyle Inc. in Monclova Township, has a good handle on where the local new-home market is and where it is heading. A former finance executive with Owens Corning, Mr. Doyle started a custom-building company in 2008, midway through the recession.

“I started this in the worst market period for home building,” Mr. Doyle said with a laugh. Still, he has managed to grow his business every year.

Last year he built 47 custom homes. Through May, he’s built or started building 30 and expects to exceed his 2012 total.

“I think the [new housing] market is in a very, very good position right now. Interest rates have been a big help, but overall, consumer confidence has come back strong. Property appraisals are good, and I think it’s all just a matter of the economy continuing to get better,” Mr. Doyle said.

But the builder said he sees a few large hurdles that are keeping the new-single-family-home market from taking off and perhaps reaching past peaks, such as 2003, when local builders constructed nearly 2,000 new homes.

First, new-home construction loans just are not as available as they were before the recession.

Only two area lenders, Directions Credit Union and First Place Bank, which is owned by Troy, Mich.-based Talmer Bancorp., are providing large numbers of new-home loans without excessive restrictions, according to Mr. Doyle.

Some banks have “100 things on a check list you have to pass in order to buy a house and then they want a 35 percent down payment,” Mr. Doyle said. “Most of those are the banks that got hurt the most in the downtimes because of bad policies.”

And unfortunately, he added, most of those are larger banks with lots of assets.

Smaller and midsized banks still provide new-home construction loans, but the number of loans they can provide is limited, Mr. Doyle said.

A second problem is the availability of land. “There’s just not as much [developed] land to build on as there was,” Mr. Doyle said.

Plenty of undeveloped land is available that developers could turn into new subdivisions, Mr. Doyle said.

But developers face greater red tape than they used to and must have very deep pockets and unblemished credit to get loans.

“Development costs are so much higher than they were on the fee end,” agreed builder/developer Steven Gillenwater, president of Squires Development Co. Ltd. of Sylvania.

“The fees are what are hurting the developer at this point, and the taxes. If you open up a phase of 15 lots and it doesn’t [sell] quickly, it’s the carrying costs that hurt and that’s why a lot of developers aren’t developing,” he said.

Mr. Gillenwater is among those who feel the local new-home market is on the upswing, although not rising quickly. His business, which had been sporadic, has grown steady and comfortable, he said.

He built four houses last year, all of them in the 6,000-square-foot range. He also does renovation and commercial construction, which also has been good.

“How I compare it [to past years] is that it is improving because people are spending more when they are buying,” Mr. Gillenwater said.

“When you look at the market, there is more talk about building houses. We hear the chatter of more people that haven’t been building any houses are now getting new-housing starts. The phone is ringing more regularly now than it was two years ago,” he said.

“The 1,500-square-foot market was always there, and the higher-end market was always there. But it was that middle market that wasn’t there that is starting to move, and that’s a sign that our industry is taking off,” Mr. Gillenwater said. “It’s the second-time homebuyer that’s now starting to move and looking to build.”

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.

Copyright 2015 The Blade. All rights reserved. This material may not be copied or distributed without permission.